Iron ore futures continued to rally for second consecutive day since the start of week over supply concerns.
The most-traded iron ore for September delivery on China’s Dalian Commodity Exchange went up by 3.31% or RMB 28.50 day-on-day to RMB 890 per tonne on Tuesday.
The steel rebar contract on the Shanghai Futures Exchange then hiked up slightly by 0.76% or RMB 29 to RMB 3,840 per tonne.
Supply concerns over medium grade and Brazilian fines
The iron ore prices rally was triggered by the supply tightness of medium grade fines among portside stocks.
Despite the port inventory reaching at 114.02 million mt of iron ore for the week ended at July 31, some trade sources indicated that there was lack of medium grade fines in the stockpiles, especially for PBF and Newman fines at Shandong ports.
Brazilian fines also drawn some supply concerns due to rising coronavirus cases in the country which led market participants to doubt whether Brazilian miners like Vale can increase its output for second half of the year.
More focus on domestic demand
Due to the high China’s economic indicators like the PMIs, market participants expected fewer steel exports from the country to fuel its domestic needs.
In July, the Caixin/Markit PMI reached a nine-year high of 52.8 readings, beating market expectation of 51.3 and indicating a third straight months of expansion for the Chinese private manufacturing sector.
According to Mysteel’s assessment, the export price of SS400 4.75mm HRC went up by another RMB 2/mt on week to RMB 475/mt FOB Tianjin port North China.
Despite the higher export prices, the steel consultancy expected less Chinese steel exports as many mills were focused in providing construction steel materials for domestic infrastructure projects, driven by the country’s stimulus policies.